Luck may be running out for Internet cafes

Thursday

Apr 25, 2013 at 12:01 AMApr 25, 2013 at 7:57 AM

A shift in course by the Ohio Senate could mean Internet cafes are doomed. During the past few weeks, majority Republicans had indicated that they favored regulation over a ban, might not move a bill until next year and questioned whether a law was needed if the attorney general already thinks the businesses are illegal. But after a recent appeals court decision, additional information from law enforcement and some unflattering media coverage, Senate President Keith Faber, R-Celina, said yesterday that the Senate will move a bill in May to ban the nearly 800 cafes operating in Ohio.

Jim Siegel, The Columbus Dispatch

A shift in course by the Ohio Senate could mean Internet cafes are doomed.

During the past few weeks, majority Republicans had indicated that they favored regulation over a ban, might not move a bill until next year and questioned whether a law was needed if the attorney general already thinks the businesses are illegal.

But after a recent appeals court decision, additional information from law enforcement and some unflattering media coverage, Senate President Keith Faber, R-Celina, said yesterday that the Senate will move a bill in May to ban the nearly 800 cafes operating in Ohio.

“I am convinced these entities are not only illegal, but many of them also engage in criminal activities within their facilities,” Faber said, speaking more authoritatively about the businesses than in the past. “Ohioans did not contemplate this kind of unregulated gaming activity when they voted to approve gaming in the state. So the time to act is now.”

Faber also has asked his members to return all political contributions from the Internet cafe industry given since Jan. 1, including about $1,500 from his own campaign. The industry gave lawmakers $110,000 in 2012.

Faber was joined by Attorney General Mike DeWine, Franklin County Prosecutor Ron O’Brien and Department of Public Safety Director Tom Charles, who also attended Tuesday night’s private Senate GOP caucus meeting to talk with members about the cafes, also known as sweepstakes parlors, and the criminal investigations surrounding them.

“We made them aware of things they weren’t aware of before,” O’Brien said.

Armed with an appellate court ruling that said Internet cafes are illegal gambling, DeWine grew tired of waiting for the Senate to act.

Last week, DeWine and a half-dozen law-enforcement agencies, including the Ohio Investigative Unit, raided six Cleveland-area sweepstakes parlors, seizing bank records and more than 200 terminals. They also hit the New Jersey headquarters of a sweepstakes-software provider, VS2 Worldwide Communications.

The raid of VS2 turned up strategy memos detailing how much in campaign contributions the sweepstakes owners were to give to lawmakers and legislative campaign committees. Most names on the list were of Senate Republicans.

Senate GOP leaders also were found meeting this month with Internet-cafe-industry officials at a swank Downtown steakhouse, shortly after it was announced that the bill might be delayed until next year.

The Senate did not act on an Internet cafe bill last session after it passed the House. The House in March again passed a bill that would add regulation, including a $10 limit on prize payouts. Cafe owners said that would effectively put them out of business.

Gov. John Kasich supports the bill.

Faber said the Senate may try something different, potentially banning activity if a certain percentage of gross revenue is paid out in prizes.

Internet cafe owners have told lawmakers that they run sweepstakes games, not gambling, and that people enjoy the activity. Sweepstakes cafes typically sell customers phone cards or Internet time in exchange for a chance to win cash prizes.

But the Ohio 8th District Court of Appeals in Cleveland concluded that the cafes are a “patently obvious gambling scheme.”

Faber said that appeals court ruling, plus more information provided on possible illegal activity, such as money laundering, going on inside the businesses turned the tide toward banning Internet cafes rather than just regulating them.

“There may be some good folks out there operating these, but the reality is, this practice and this industry is fraught with peril,” Faber said.

A moratorium on the opening of new Internet cafes is in effect until June 30, and Faber said he hopes to have a bill passed next week that would expand that moratorium and impose additional registration requirements while the legislature finishes work on House Bill 7.